Giving up on the 1-Yard Line: Finding triumph over mistakes that companies make

This article was published by CMC Canada in the Summer 2019 issue of Consult.

In my many years as a business advisor and venture capitalist, I have seen companies make a lot of mistakes.  There have certainly been successes, but mistakes, unfortunately, are a lot more common.  Some of the ones that are the most damaging are those that are analogous to “giving up on the 1-yard line”, where after a prolonged period of time of working, pushing forward, and focusing on their game, a company’s leadership throws up its collective hands and says, “I’m done”.  Why is this so harmful?

First, this situation tends to occur when facing challenging tasks that are integral to the success of a company; examples include areas such as properly conducted business planning, implementation of fundamental systems and processes, and successfully attracting financial and strategic partners.  Appropriately addressing these areas tends to take far more work than business leaders anticipate; they also represent initiatives that might be entirely new.  As a result, the keen enthusiasm that is apparent when a project begins tends to fade to an attitude of “we don’t need to work this hard”.

Second, companies sometimes have difficulty focusing on priorities, as key areas tend to be far less glamorous that the “fun” aspects of being in business, such as designing a new logo, touring office space options, or chatting up prospective partners that the company has little potential of actually attracting.  Days get filled with these activities, that are more about busy-ness and less about results, decreasing the amount of available time to focus on the real work that needs to get done.  This is a hard lesson that business leaders tend to discover far too late, and can be as damaging as losing key customers or running out of money.  Full stop.

A better approach is recognizing that advisors who have “been there” and “done that” are in a unique position to provide the important leverage that companies need, to ensure that they are focusing on the right things, conducting their work at a quality level, and not running out of steam.  How can this be achieved?

  • Priorities are not always obvious. Amazing, but true.  Business leaders can get so caught up in the challenges of running the company on a day-to-day basis, dealing with staff members, and responding to customer needs that they are unsure (or unaware) about the steps that should be taken to make meaningful progress on a corporate level and might lack the experience of what is required in order to do so.  Advisors can play a key role by identifying and prioritizing task items and keeping the implementation process on track.  All of these areas are common pitfalls and represent the difference between starting something and actually getting it done (activity does not equate to meaningful progress).
  • Experienced advisors are the “acid test”. Advisors with a strong experience and qualification base understand where important initiatives need to “get to”, such as what financial partners need to know in order to make a decision.  Companies tend to take the view that “what we provide to them will be good enough”, failing to understand the woeful inadequacy of this approach.  Using raising capital or financing as an example, experienced financial partners have typically reviewed more opportunities than they can count and operate in an environment of limited money and an investment mandate that guides selection.  They very quickly slot opportunities into a category, and chances are, it won’t be the “yes” file.  Experienced advisors have a skillset that is extremely valuable; one that can help a company put its best foot forward and anticipate what is required in order to get to a successful outcome.  Be sure to probe an advisor’s qualifications to ensure that they are the right fit for the particular initiative at hand.
  • Utilize skill to get there, faster and better. Teams who spend the whole game running around on the field, for the sake of running around, don’t win very many games.  Coaches of successful teams know how and when to utilize resources in a manner where they can make the best contribution, including recognizing that there are times when specialized help is needed.  This is where an experienced advisor can play an important role, providing the necessary expertise to quarterback complicated plays and get to the endzone more quickly.  Business leaders sometimes do not appreciate the value of resources with the right experience; this fact tends to get reinforced in times of poor advice, from those who are not qualified to help, or when receiving no assistance at all.  A company might not recognize the weaknesses that result, but the external party that they are trying to impress likely does.

These lessons might seem relatively straightforward, but reality reflects something quite different, as fumbles and mishaps in all of these areas, and numerous others, are quite common.  What can make a big difference is perspective; stepping back to see how far an initiative has come, the relatively short journey that remains, its level of priority, and what success requires.  If business leaders did this more often, there would be far fewer companies walking off the field with only one yard left to go.

EVENTS: Speaking at CIX (Canadian Innovation Exchange)

Pleased to be on the Speakers list for CIX, the Canadian Innovation Exchange, “where connections are made and deals get done”.  CIX is a must attend technology innovation destination, where investors, innovative companies, entrepreneurs, and facilitators converge to drive economic growth and accelerate the development and implementation of new ideas.  This two-day, internationally recognized technology investment conference includes a range of sessions and powerful networking opportunities, including the showcasing of CIX’s Top 20 Companies for 2018, a group that I had a hand in selecting again this year, as a member of the Selection Committee.  This year, the Top 20 includes companies from Ontario, Quebec, BC, PEI, and Saskatchewan.

Experience has taught me that action-based implementation assistance is an area that young companies do not always fully appreciate.  Implementation tends to require far more time than anticipated and involves more challenges than one would expect, resulting in many promising companies failing to reach their potential.  What’s critical is having access to experienced resources, be it advisors, investors, or senior level executives, who possess tried and true strategies that accelerate growth.  No matter how poised for success you might think your company is, don’t make the mistake of failing to build out your team to include experienced people who have the ability to help generate success and avoid pitfalls.

If you are a leader of a high potential company attending CIX, feel free to drop by and say hello.  See you in Toronto!

MEDIA: Appearance on SET for Success (680 CJOB Radio)

Pleased to have appeared on SET for Success on 680 CJOB with Richard Lannon to discuss some important areas that business leaders need to address to successfully grow and develop their companies.  Being a market leader is a goal for many, but in order to realize a company’s full potential, it’s critical to identify what that means for your business and then develop and successfully implement the plan.  This process is one that is fraught with challenges, but having the right assistance could made success much more likely, to the benefit of your company.

As a business advisor, my approach is to bring a holistic perspective, recognizing that all functional areas within a company are related and impact one another.  For a company to grow on a sustainable basis, all functional areas must be operating well, to provide the foundation for building capacity and sound operations.  Those who do this well are in a position to become market leaders, representing the choice of investors, strategic partners, high calibre employees, and customers.  Those who take a piecemeal approach tend to end up frustrated, wondering why their results are not better.

When companies are growing (or planning to do so), they must also recognize that capital is an important component; this is something that business leaders tend to discover too late.  As a former venture capitalist still active in the industry, the vast majority of business plans that I see are not investor ready; this is the case at least 95% of the time.  Investor readiness involves understanding the expectations of financial partners and investors, which differ significantly from where business leaders tend to focus their efforts.

Advisors could be helpful in a range of areas, including assisting companies with investor readiness and developing strategies for growth and implementation.  As important as planning is, the most significant failures could occur during the implementation process, which is another lesson that business leaders tend to learn too late.  If the objective is to generate sustainable growth and build value in a company so it could be transitioned to someone else in the future, market leaders would not attempt to do so without sound advice.

You can listen to our conversation hereContact us to learn more about taking the next steps in growth for your company.

NEWS: Executive Business Builder Program Now Available!

As the lead instructor, I’m pleased to announce that the Executive Business Builder Program is now available!

This program is designed to help business leaders build a future-ready company, including building value and best practices, through courses, mentorship, and access to a powerful network of inspirational, like-minded people.  Learn practical strategies for building a company that can generate solid performance and be positioned for transfer to someone else in the future.  Value doesn’t just happen, and leaders need to take tangible steps to enhance their company.

The first course, Strategic Business Planning, is already available, and additional courses are already in development.  Don’t miss out on this opportunity to move from business leader to business builder!

NEWS: Strategic Business Planning Course Now Available!

I’m pleased to announce the launch of my new Strategic Business Planning Course, the first course in the new Executive Business Builder Program at The Knowledge Bureau.

It might be news to a lot of CEO’s and entrepreneurs that most business plans are not prepared very well.  Although a company’s management might find the plan useful, they tend to fall well short of what external parties, such as potential financial partners, require in order to make a financing or investment decision.  This course provides sound business planning guidelines for both internal and external use, putting leaders in a better position to pursue the necessary capital to support the next level of growth.

Getting it right involves developing a thorough and complete business model, strategy, and plan (including a financial forecast), as well as preparing to make the approach to potential financial partners.  Gain insight into a range of important areas, from the perspective of a former investor, including:

  • The key sections of a business plan and what should be included
  • What to consider when building a business model
  • How to identify and select a target market(s)
  • How to select and position products and services
  • Guidelines for developing a marketing strategy
  • Developing an organizational structure, including identifying key roles
  • Guidelines for preparing a financial forecast, including assumptions
  • The perspective of external parties, such as financial partners
  • Guidelines for approaching financial partners

Details and registration are available here.  Stay tuned for additional courses in the Executive Business Builder Program!

Getting Started: Preparing for the world of entrepreneurial adventure (Attitude)

ThinkstockPhotos-176797481

Published by CPA Canada in CareerVision

Although you’ve completed years of education and gained some experience, there is still much to learn.  Whether this reality hits you as daunting, exciting, or somewhere in between, you probably don’t realize just how much your attitude matters when facing future learning.  Many of us were raised with reminders to “think positive”, but probably didn’t realize just how important this is when facing something new.  This concept is particularly relevant in the startup world.

Generating success isn’t just about getting something new to “work”; but rather, in the case of startup companies that require assistance and investment from others, it’s more about what comes along with the quest for capital.  Investors tend to have many choices where they can put their money, and there are often far more options than what can be financed.  For this reason, those with capital have the latitude to select the opportunities that represent the best “fit”, in terms of returns and the ease of getting there.  A big part of this has to do with attitude.

Why it Matters

One of the “screens” that early stage investors tend to use to evaluate investment opportunities is the attitude of a company’s leadership, particularly in terms of responsiveness to advice.  For all that is known, there is much more to learn, and investors typically bring a host of knowledge that is critical to moving a young company forward.  Although they might not understand all of the intricacies of a startup’s technology platform, investors understand enough to generate success, as well as many other things that entrepreneurs typically don’t have the depth of experience to appreciate.

What is powerful is when experience and emerging ideas come together to build something that is both competitively advantageous and soundly executed.  In order to do so, startups need to be receptive to good advice and demonstrate an ability to work well with those who have more experience than they do.  What many startups don’t realize is that investors have better things to do than fight with entrepreneurs who will never see the light, and, as a result, will bypass these situations for more productive opportunities.  Don’t let this happen to your business!

Get Started

Experienced investors know that smart entrepreneurs will do whatever they can to reduce the risk of rejection.  Since grace in times of what could be a hearty dose of reality isn’t a given, take the opportunity to get some practice; here’s how:

  • Learn how to focus on “breathing”: If you’re not in the routine of receiving constructive criticism, it’s time to get used to it.  When facing times of difficult questions or advice, learn how to respond.  Practicing how to reflect on the question, “count to 10”, or give all ideas a “positive life” for a period of time can help.
  • Reflect on what you don’t know: Step 1: Accept the fact that you don’t know everything.  Step 2:  Accept the fact that there are things that you will be wrong about.  Step 3:  Make an active effort to learn about what you don’t know.  Step 4:  Reconcile the first three steps and move forward with a positive attitude, not grudgingly or with resentment.
  • Refresh research skills: Although it might be easy to find information online and think that this alone addresses the question or combats the advice, this is only half the battle.  Investors know that understanding what to do with the information is what really matters.  Think about it.
  • Practice developing responses: Startups seeking capital will be asked a lot of questions and face a great deal of advice.  Make the most of these opportunities (yes, these are opportunities!) by learning how to address inquiries directly with responses that are thorough and relevant, yet concise, and then utilize “smart advice” for all it’s worth!

There are lots of entrepreneurs who take the position that pushing forward with reckless abandon is what matters; be difficult, be original, never surrender.  The reality is that when investment capital from others is needed, this type of approach just doesn’t cut it, and although some things might be worth fighting for, the list should be short.  Failing to do so can result in alienating the audience that startups have such a critical need to engage in order to move forward; one that’s counting on your positive attitude.

Getting Started: Preparing for the world of entrepreneurial adventure (Finance & Business Acumen)

Hand and aces

Published by CPA Canada in Careervision

You’ve spent a good portion of your career in the business world, working with those who manage, keep track of the numbers, and hopefully understand it well.  In addition to this practical experience, you’ve probably spent a number of years completing formal business and finance study.  It’s easy to take management and finance for granted, when it’s a big part of what you and those around you do on a daily basis.

Although entrepreneurs tend to end up in the leadership role in startup companies (often by default), most lack actual business experience; this is particularly true in terms of finance.  The bulk of the emphasis tends to be placed on the product, service, or technology (entrepreneurs are typically guilty of this!), resulting in the business and finance aspects that are so important to any company being overlooked.  This can also be a function of entrepreneurs simply preferring to spend their time on what they love, and it isn’t accounting.

Those who have formal education and experience in these areas have knowledge and skills to offer to startup companies, to a degree much more than they realize.  What’s important is to understand what the real needs are and why, so that the opportunity to prepare in advance isn’t missed.

Why it Matters

As already explored in this series, startup companies lack the stability of more established businesses, and one of the main areas of risk is cash flow, closely followed by the challenge of attracting investment capital to support growth.  Non-financial entrepreneurs typically don’t realize the degree to which their venture is at risk in financial terms, nor do they understand the needs of early stage investors, when it comes to raising capital.

As a result, startups often find themselves in double trouble: (i) short of cash and the skills to manage it; and (ii) an inability to provide the financial oversight and reporting that investors require.  The outcome, too often, is a predictable death spiral, where these two factors get caught in an endless loop, resulting in the business running out of cash and being unable to generate what’s required in order to stop the plunge.

Get Started

Chances are that you have underestimated just how much the business and finance skills that you have learned and practiced are of value to startup companies.  Put a lid on the typical excitement and hype associated with new technologies and opportunities and focus instead on accentuating the value of what you have to offer:

  • Become acquainted with the “hands on” finance role: Since startup companies are small, the “accounting person” often has to do it all: transaction entry, generating financial statements, and dealing with billing and banking matters.  Recognize that startup work is much more involved than a lofty oversight role and that the buck will truly stop with you.
  • Map out routine processes: Make the most of limited time by developing checklists to guide task completion, including on a weekly and monthly basis.  Most entrepreneurs don’t have the financial experience to do this and it will make everyone’s life easier, as well as provide the discipline that investors seek.
  • Revisit financial accounting, in reporting terms: Recognize that internal reporting and recordkeeping often differ from what external parties expect to see.  In order to keep investors and financial institutions happy, ensure that you’re able to produce monthly financial statements in the standard financial accounting format.
  • Master cash flow management: Being able to manage cash with confidence is critical, and may not be a skill that is practiced much while working in a larger company.  Cash flow management is not an area to be learned on Day One of working with a startup, so get lots of advance practice now.
  • Learn about what investors require: Early stage investors look for a qualified person in the Finance Chair, as it’s this individual who will take care of their investment.  Recognize this and seek to learn about their particular needs, in terms of reporting and ongoing operation of the finance function.

Early stage investors recognize that the majority (if not the vast majority) of startup companies fail.  There are a variety of reasons for this, including products that aren’t competitive in the marketplace and an inability to attract enough customers.  What’s more typically the problem, however, is poor execution on the part of Management, in terms of not running the business well.  At the core is often a lack of financial acumen, resulting in the company running out of money before it even had a chance to get started.

EVENTS: CVCA Insights, Data Release Roadshow (Apr 6th, Halifax)

Pleased to be co-sponsoring this event with innovacorp!

Join us for a morning of networking to mark another great year in the private capital industry.  The CVCA‘s Chief Executive Officer, Mike Woollatt, will discuss the 2015 Market Overview, including transaction and fundraising data, most active Venture Capital and Private Equity investors, top firms, rising investment sectors, and other insights.

Registration is required by March 30, 2016 and seating is limited.  Reserve your place today!

Getting Started: Preparing for the world of entrepreneurial adventure (Early Stage Financing)

ThinkstockPhotos-489975248

Published by CPA Canada in CareerVision

One thing that most start up companies have in common is a lack of resources, including people, capital, and “stuff”. The root of this shortfall (or the thing that can resolve it) is money, something that can be hard to come by in the startup world.  Once entrepreneurs have exhausted their own funds, and often that of friends, family, and anyone else they can convince, the only remaining option is to find an investor.  This is a big step for many young companies, as it represents the first time that the money ask goes outside of “the circle”.

There’s another important reason why approaching an investor is such a significant step, and it is simply this: most entrepreneurs have no idea what investors need to know in order to make an investment decision. Put another way, investors, be they experienced angels or institutional funds (such as venture capitalists) have very specific expectations in terms of the information they require.  This includes content and format, as well as fitting within the investor’s particular mandate.  While it might sound simple, it’s anything but, and most of what investors receive doesn’t meet their needs at all.

Life in a corporate job usually doesn’t involve spending time in this area, especially in terms of just how critical it is to success. Financing matters are typically handled by others, and access to this type of external party is limited.  In this series, our focus is on understanding the significant differences between a startup environment and the corporate world so that you can place a greater amount of emphasis on developing some of the skills that will serve you well in advance of when they’re actually needed.   So far, areas we’ve considered include risk, rejection, and money.  Understanding the expectations of early stage investors couldn’t be more important!

Why it Matters

Entrepreneurs tend to show a lot of confidence when discussing the topic of investors. They’re excited about the product/service they’ve developed, and generally expect that others will be equally impressed.  Comments like “so-and-so wants to invest” or “is ready to cut a cheque” are often heard, but as the process moves forward, these seemingly slam-dunk situations tend to fade.  Impressed or not, entrepreneurs are often left to wonder where the money went.

A big part of the reason for this is that young companies lack the ability to package an investment opportunity in a manner that meets the needs of investors. Be it the business plan that lacks context, too much emphasis on the product, or a financial forecast with questionable assumptions (or none at all; startups can’t forecast!), investors aren’t buying.  Entrepreneurs tend to respond by offering up information that is used to run the business, or even worse, more technical information, in the hopes that the tide will turn.  No such luck.

Get Started

Not understanding the needs of early stage investors is a very common problem in the start up world. Rise above it by taking the time to understand what investors want to know, well in advance of when the bank account is empty:

  • Research the topic of early stage financing: Venture capital and angel investing are specialized areas that are not understood well, and reading about it in a text book isn’t sufficient. Tap into resources produced by investor networks, associations, and similar sources to understand how it works and the preparation that is required.
  • Recognize that investors have specific needs: Many entrepreneurs simply do not do this. They believe that all they have to do is provide “what they have” and the investor will adapt. In a world where deal opportunities vastly outnumber the supply of capital, this isn’t likely to happen anytime soon.
  • Learn how to write a business plan: Bypass the folklore that “investors don’t read business plans”; they do. In addition, they challenge entrepreneurs on their business model, target markets, and the financial outcome of implementing the plan. All of these areas are very difficult to address well in the absence of having developed an investor ready business plan.
  • Network with experienced advisors: Those who specialize in the area of early stage financing have a clear understanding what is needed to raise the likelihood of getting to yes. Although there are no guarantees in life, their expertise can be invaluable. Look for those with a demonstrated early stage financing background, such as a former venture capitalist.
  • Practice accepting rejection gracefully: As simple as it sounds, doing this well can be the difference between ultimately receiving capital and burning your bridges. Chances are, you won’t raise money on the first (or even on the tenth!) try, so learn how to make the most of these interactions by asking questions, seeking out network contacts, and leaving a professional impression. Too many entrepreneurs do the opposite.

Thinking that your product or service is so great that investors will line up to put money in is a path to failure. If there is a scenario out there where all of the stars will line up to secure easy capital, chances are, it won’t be your company.  These are rough lessons that are best learned before they happen, so take the time to understand the complex world of early stage investing and prepare for it.

COVER STORY: Canada’s Venture Capital Report Card- Building on regional successes to stoke the long term fire

Cover story, as published in Private Capital, Q4 2015

The Conference Board of Canada’s most recent Innovation Report Card includes some impressive venture capital benchmarks, but there’s much more to consider when looking beneath the surface.

Decreased venture capital investment levels in peer global markets, which are largely a lingering byproduct of the financial crisis, coupled with brisk, but isolated investment activity in select geographies here in Canada raises questions about our ability to sustain a high ranking when conditions improve elsewhere.  Perhaps, even more importantly, these findings put the focus on what actions should be taken to bring improvement to Canada’s weaker markets, of which, there are quite a few.

The Findings

Canada

Increased venture capital investment, primarily in Canada’s large provinces, coupled with lagging investment in European countries since the recession have resulted in Canada moving from being one of the weakest performers to one of the strongest. Specifically:

  • Canada’s ranking has improved from third worst in 2009 to second best in 2014 in venture capital investment, relative to 15 peer countries. Canada earned a B grade and a fifth place ranking overall.
  • Canada’s venture capital investment has more than doubled, from nearly $1 billion (.07 per cent of GDP) in 2009 to over $2.3 billion (.12 per cent of GDP) in 2014.
  • The number of companies receiving venture capital in Canada has increased from 378 in 2009, to 416 in 2014. Peak levels of approximately 450 companies receiving venture capital in 2011 and 2012 have not been met in recent years.
  • The vast majority (80 per cent) of Canada’s venture capital investment in 2013 was later stage, with only 20 per cent taking the form of early stage financing. This falls well short of international trends where more than 60 per cent of venture capital targets early stage financing. The report notes that Canadian venture capital took a much more balanced approach in 2009, when financing was more evenly split between early and later stage.

The Provinces

Provincial venture capital investment levels and rankings vary widely, from A to D-, with six provinces receiving a D or D- ranking. Specifically:

  • Both BC and Quebec rank as A’s in terms of venture capital investment (representing .16 per cent and .14 per cent of GDP, respectively), outpaced only by the US (.17 per cent of GDP).
  • Although companies in Ontario received more venture capital money than that of other provinces, the venture capital investment level of .11 per cent of GDP was sufficient to earn a B ranking.
  • Propelled by two venture capital deals totaling $60 million in 2014, Newfoundland and Labrador received a C ranking.
  • Canada’s remaining provinces received a D ranking in venture capital investment, with Manitoba and Prince Edward Island receiving a grade of D-.
  • Substantial increases in venture capital investment levels from 2009 to 2014 have occurred in four provinces; Ontario (117 per cent), BC (91 per cent), Alberta (81 per cent), and Quebec (61 per cent). All other provinces have experienced declines.
  • In terms of the number of Canadian companies that received venture capital funding in 2014, the highest levels occurred in Quebec (151), Ontario (142), BC (60), Alberta (27), and New Brunswick (19). The remaining provinces ranged from one to nine companies receiving venture capital.

The Fuel

Canada’s much improved ranking was assisted by the fact that, with the exception of the US, venture capital investments declined in all of the other peer countries between 2009 and 2013. Canada weathered the recession better than many countries, contributing to more stable venture capital investment levels. In fact, venture capital investment levels have now returned to the pre-recession level of $2.3 billion. Contributions from the Venture Capital Action Plan (VCAP) have helped, as well as the ongoing participation of BDC Capital, which the study cites as Canada’s largest and most active early stage technology investor.

Venture capital investment in Canada from foreign sources has continued to rise. Traditionally, it has represented approximately 30 per cent of the total, but increased to more than 37 per cent in 2014 from US sources alone. Clearly, venture capital investment levels are positively impacted by foreign participation and our own public policy that encourages investment.

However, we must also be wary of the fact that Canada is currently standing out in a cohort that is performing well below its pre-recession standards. What we do next to continue to separate ourselves from the pack now could have long-standing consequences.

Viewing Canada’s current position of strength as an opportunity to make the necessary improvements to “lift the level of all boats” is a much more proactive approach than simply benefiting from the rise of the tide.

The Fire

Improving venture capital investment levels across the country and generating long term sustainability are important areas of focus. The Conference Board cites a number of factors that contribute to establishing a successful level of venture capital investment, including the presence of those with money to invest, companies that are investment worthy, and a means to connect the two.

Much could be said about the challenges of establishing venture capital pools in particular geographic areas and the difficulties of allocating a portion of funds in existing pools to investments with a higher risk profile. Regardless, fueling the venture investment process requires a stable of “investor ready” companies, enabling venture capitalists to invest well, work with high potential businesses, and generate the returns that are so important in attracting fundraising over the long term.  These are critical components in generating a sustainable venture capital environment.

Venture capitalists recognize that the presence of investor ready businesses and the right approach to get there are, in many ways, the fuel for generating a vibrant investment environment. Too often, the focus tends to be on leading with capital, and although this approach might find some initial success to “get money out”, it does little to generate the level of returns to stoke the fire for the long term.